Sole Proprietors, Partnerships & Unincorporated Businesses
Canada Revenue Agency has special rules with respect to Private Health Services Plans for sole proprietors and unincorporated businesses. These PHSP rules take the form of Section 20.01 of the Income Tax Act and apply to sole proprietors and unincorporated businesses such as partnerships and independent contractors (for the purposes of below "the business").
You must be actively engaged in your business on a regular and continuous basis, directly or as a member of a partnership.
In the current year or in the preceeding year, your net income (before PHSP deductions) from the business must be more than 50% of your total net income
Your total net income from sources other than the business does not exceed $10,000
Benefit Limits for Businesses without Employees
Maximums* are based on the number of dependants that the business owner has and are as follows:
- $1,500 for the business owner
- $1,500 for dependant spouse
- $750 per dependant child (under 18 years of age)
- $1,500 per dependant that is over 18 years of age
*These maximums assume the plan is in place for the entire calendar year. These amounts are subject to proration based on the number of days in the calendar year that the plan exists.
With a Family of four that has husband, wife, 12 year old child and 19 year old dependant (e.g. son in university) the limit would be $5,250 (or husband and wife at $1,500 each plus $750 for minor child and $1,500 for the student). If the plan was created on March 1st of that year the total limit would be reduced to $4,613 (305/365 x $5,520). The full amount is available to any member of the family.
Should you decide to incorporate these benefit limitations can be set by the corporation and are not stipulated specifically by Canada Revenue Agency.